Target agreements (MBO)

MbO is intended to ensure that all employees work stringently towards implementing the corporate goals and the strategy defined for them - i.e. concentrating their energies on the essentials. At the end of a defined period, the degree of target achievement is measured.  

Field of application

As a rule, target agreements are a contractual instrument that is an integral part of the remuneration arrangement under the employment contract. This instrument is used when employees/groups are to be given greater autonomy.

Usefulness

• Target agreements are the basis for a structured assessment of performance and willingness to perform
• Detailed specifications regarding the procedures of the employees are no longer required
• Inclusion of employee experience
• Höhere Motivation, Ergebnis- sowie Zielorientierung und Identifikation der Mitarbeitenden mit UnternehmenszielenIncreased motivation, focus on results and goals as well as  identification of employees with corporate objectives

Prerequisites

• Definition of a small number of meaningful goals ("fit" between goals and corporate strategy)
• Measurability and transparency of target achievement
• Co-determination of the social partner, inter alia with regard to the basic design of the target agreements
• Existence of an evaluation scheme or a system for the variable remuneration of employees

Core elements/procedure

The target agreement process is typically initiated by the supervisor or the human resources department. In some cases, companies offer their employees the opportunity to formulate target alternatives independently of each other. As a rule, objectives are cascaded from top to bottom.  

Inference

The discussion of alternative objectives is followed by a joint agreement on objectives and their documentation. Goals must be measurable, specifically demanding, feasible, concrete, influenceable and fixed in time. The factors influencing the achievement of objectives must be transparent from the outset. Finally, the extent to which the goals have been achieved - including feedback to employees - must be measured systematically and regularly. If relevant framework conditions change, goals must be adjusted flexibly.

Cascadation and effect of targets